The Department of Commerce reported today higher incomes and spending for the month of May – depending on whose news you read. At AP, the headline was “…consumers spend more.” At Bloomberg.com the headline was “…Probably Little Changed…” Traditionally, increases in income and spending would be cause for celebration reflected in higher stock prices and expectation of increasing corporate profit.

 

Reality, at times, is a bit harsher. Income data was better due to a slight increase in the number of hours worked. Increases in employment were primarily temporary workers for the census. It is expected that 250,000 of those jobs will end this month. Private sector job growth remains anemic and unlikely to offset losses.

 

The spending increase was likely driven by higher utility bills as warm weather increased demand for air conditioning. That type of consumer spending does not keep the economy rolling along. It reduces discretionary spending that is the core economic fuel.

 

Retail sales reports shed a different light. Consumers are not spending on goods. Spending increased after the 81-82 recession at almost three times faster than in the current season. Thirty years ago, we were at the leading edge of raising the Boomers’ teenage children. We are now at the trailing and shrinking edge of that demographic demand.

 

Household savings increased last month, too. This is expected as people age, have fewer family responsibilities and face retirement and more so in unstable economic times.

 

Government actions to “stimulate spending” have had minimal impact on private job creation. It is hard to imagine otherwise since the majority of the stimulus money was given to states with budget deficits. With the death this weekend of Senator Byrd, passage of another stimulus bill or extension of unemployment beyond 99 weeks will be difficult.

  

It is becoming more difficult to “kick the can down the road.” The G-20 meeting generated agreement to agree to a non-binding agreement. Generally, after all attendees were past their next election, austerity measures should be seriously addressed. In the meantime, all seemed reluctant to discard their rose colored glasses of Keynesian stimulus plans.